The 5 Most Innovative Frontier Markets In 2018 (And How To Invest In Them)

Bloomberg just released its 2018 Innovation Index, which attempts to rank the countries in the world on innovation, according to 7 different categories. Unfortunately, out of roughly 200 economies in the world, they only ranked 80 of them since they required data for at least 6 of the categories. So there is an advanced economy bias built in, but frontier countries early in their economic cycles were unlikely to shine according to this index anyway.

Most Innovative Frontier Markets in 2018

To find the most innovative frontier markets in 2018, we cross-referenced their top 50 list with our list of frontier market countries to see which ones made the list. Given that according to our records, there are 58 developed or emerging market economies in the world, any frontier market making the list would be an achievement. However, 14 (!) frontier market economies made the top 50 rankings, showing the value in looking beyond traditional developed and emerging markets for growth stories.

Iceland (#24)

Iceland, an otherwise advanced economy but with a small population that marks it as a frontier market, is the most innovative frontier market according to the index. Its small size meant it lacked data for “High-tech density”, which measures the number of publicly listed tech firms in the country. However, it was marked #2 for productivity and #9 for researcher concentration. We had the privilege of visiting Iceland last year and found it delightful.

Turns out that when Lithuanians are not playing or watching basketball, they are pursuing higher education as they ranked #9 in tertiary efficiency, which boils down to the proportion of the population with university degrees. Lithuania also ranked #14 in manufacturing value-added.

Our guide on how to invest in Lithuania is slated for the first half of this year, and this post will be updated when it is ready.

Romania (#35)

Romania’s best category came in manufacturing value-added, where it ranked #12 worldwide. However, being ranked in the 20s to 30s in five other categories kept Romania right on Lithuania’s heels.

Long known for Skype and it’s advanced national ID system, Estonia is so often lauded as a technological hub that we were surprised it wasn’t higher on the list. It ranked in the 20s for most categories, but with lagging patent activity and hurt by a lack of public technology companies, it dropped 3 rankings this year.

Seemingly out of nowhere, Malta, population 440,000, has been ranked just inside the top 40 most innovative economies in the world. It managed this by being ranked #7 in productivity, which underscores how strong of an economy and standard of living there is in such a small country. Aside from a highly educated population, the island nation did not stand out in many other categories.

We do not have a guide yet to investing in Malta, but this ranking means we will look into it in the near future.

Other Frontier Markets In The Top 50:

Latvia (#40)

Bulgaria (#41)

Croatia (#42)

Tunisia (#43)

Serbia (#44)

Ukraine (#46)

Cyprus (#47)

Iran (#49)

Morocco (#50)

Once again we wanted to underscore that there are 58 developed and emerging markets in the world, so it means that 14 frontier markets beat 22 of them in terms of innovation. It’s just one index/ranking, but it underscores why we look at frontier markets the way we do – there’s a lot of potential globally that is being overlooked.